The IMF revised recently its 2022 global economic growth forecast to 4.4% from the previous estimate of 4.9%, citing weaker prospects for the world’s two largest economies US and China as well as persistent inflation.
The fund also predicted 3.8% global economic growth for 2023, up from the prior projection while cumulative expansion for the two years will still be 0.3 percentage point less than previously forecast.
The world economy expanded 5.9% last year, the IMF estimated, the most in four decades of detailed data. That followed a 3.1% contraction in 2020 that was the worst peacetime decline in broader figures since the Great Depression.
Central banks that slashed interest rates to soften the economic decline caused by the pandemic face pressure to tighten policy to confront surging consumer prices, threatening to curtail the growth rebound. Governments also have less fiscal space for spending to address health needs and buoy their economies after piling up record debt.
While the IMF expects omicron impacting growth in Q1 of the year, it estimated that the negative impact would start to fade in Q2. This is based on the assumption that the global surge in infection abates and there wouldn’t be new variants that places more restrictions on mobility.
According to the IMF, supply-chain disruptions are spurring more broad-based inflation than expected — 3.9% projected for advanced economies and 5.9% in emerging and developing ones this year.
The fund slashed its forecast for growth in the US by 1.2 percentage points to 4% and cuts its growth forecast for China by 0.8 points to 4.8%.
India will see the fastest growth among major economies at 9% from 8.5%, due to credit-growth improvements, IMF said.